Chapter 7 bankruptcy exemptions allows a person to keep assets like land, homes , cars and any other asset by claiming that they are exempted under the state or federal exemptions provided for bankruptcy in most cases. Filing for bankruptcy is usually the last option available for those who want cannot pay back their creditors but still need some form of protection for their assets. Bankruptcy can happen due to various factors affecting people’s lives such as retrenchment, marital collapse, and medical issues among many others. Filing under chapter 7 allows for the sales of some assets to ensure that creditors are paid back to the amount that they were owed. This bankruptcy law is not indiscriminate but comes with some exemptions.
Under chapter 7 bankruptcy exemptions debtors are allowed to use only state exemptions. A few allow their residents to choose between federal and state bankruptcy exemptions. Since most people are unaware as to whether they are eligible for chapter 7, it is recommended that they consult an attorney who shall guide them on any exemptions applicable within their native state.
In most cases, the personal residence can be exempted. Different states provide varying figures. For instance, in Alabama the upper limit exempted cannot exceed $5,000, whereas in Texas all homes are exempted irrespective of their amount. For those still paying mortgage on their homes this may still be required so that ownership can be maintained. Exemptions in some states may require special processes in the cases where spouses own the residence together. This is a commonly applied exemption.
Most states have exemptions for cars. Although the amount differs between the different states, the upper limit is usually about $15,000. To calculate the value of the vehicle it is important to get a current valuation and then subtract the outstanding loan on it. You would get to keep a car under chapter this exemption when its value of the vehicle is less than the exemption minus the pay off.
Other exemptions that can be applied for include exemptions on business tools, pension plans, terminal benefits, children payments, divorce payments, life insurance, and jewellery of a certain amount, personal clothing, house appliances and belongings. Chapter 7 bankruptcy exemptions generally do not cover for holiday homes, additional residences, additional cars, financial investments like cash, bonds, stocks and bank accounts, collectables like stamps and coins among others. These exemptions are decided differently by each state.
All exemptions require the individual to provide a list of all goods exempted including their current value, descriptions and value exempted in detail. This information is crucial for the bankruptcy case to continue successfully. Myths abound that bankruptcy leaves the debtor flat broke but this is not true. It does provide the debtor room to start afresh and move forward beyond the crippling debt.